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Saturday, November 09, 2002

'STRUCTURAL REFORM' CHINESE STYLE

According to the New York Times Chinese politics is on the move and the world's last major left-wing dictatorship, the Communist Party of China, has transformed itself. The only problem: China, for the NYT is now, arguably, the world's last major right-wing dictatorship. China as the paper concludes seems to be heading down the road of crony capitalism minus the democratic bit. As Stephen Roach is continually reminding us, China is the planet's last remaining growth engine. On one version the process of change itself will change China, but if it doesn't? I have to admit I have one recurring late-night deep-sweat sleepbreaker. It goes something like this. The US under the leadership of George W gets itself embroiled in one counter terrorism war after another, Afghanistan, Iraq, (Indonesia?) entering, but finding it difficult to exit, and then we wake up one morning to the news that China has decided it's time to assert its claim over Taiwan.

With the convening of the 16th Congress in its 81-year history, the party is rewriting its constitution to declare that it represents "advanced forces" — capitalists — as much as workers and peasants. Rich people have begun joining the party. A few may be invited to join its policy-making Central Committee. Jiang Zemin, the Communist Party chief who plans to retire after the Congress adjourns, has buried the last real pretenses of socialism. "All legitimate income, from work or not, should be protected," he told the party Congress on Friday. The old China defended the working class against the capital class. In the new China, Mr. Jiang said, "the fundamental interests of the people of the whole country are identical."

Foreigners have invested more money in China so far this year than anywhere else, including the United States. All that money is flowing because the party has used its near-absolute power to create favorable conditions for capitalists. Companies setting up factories in Guangdong or Shanghai can employ workers from the hinterlands, often paying them less than $100 a month for 12-hour days. Migrant laborers can stay in cities only so long as their employers need them; without urban residence permits, they have no local rights. The government does not allow independent unions. There is no collective bargaining.

Among wealthy nations, the United States is considered stingy when it comes to social benefits and health care spending. But by percentage of its economy, China makes the United States look profligate. In other words, it does not make rich people share their wealth. The gap between rich and poor has grown almost as fast as overall income, meaning that inequality is increasing nearly in lock step with the country's development. Other critics say that opening the party to businessmen will delay a needed political reckoning. "The economic elite love money, not democracy," wrote Kang Xiaoguang of the Chinese Academy of Social Sciences. Such views could be widespread, but it is hard to tell, since Mr. Jiang has closed the main leftist academic journals where criticism of his policies was being expressed, including the one that published Mr. Kang's essay. Mr. Jiang would not agree that his party has abandoned the poor. China, he argues, is still in the "primary stage of socialism." Later on, contradictions between the working and capitalist classes may become acute and the poor will vanquish the rich. But not in the primary stage, which could last 100 years.

China's Communist Party seems unable to escape the paradox of its continued existence. It has entered the 53rd year of uninterrupted rule, and has 66 million members. But in the party's careerist tradition, many new members are successful capitalists who joined — became Communists — to help themselves make more money. Communism, then, has become crony capitalism. The party is betting that this shift will help it create enough jobs to employ the millions of urban unemployed, as well as millions more among China's vast, impoverished rural population, many of whom are seeking better lives by moving to the cities and industrial zones. If this plan works, power will remain entirely with the Communist Party. It's a vision of China's future than appears to include everything but democracy.
Source: The New York Times
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About

Edward 'the bonobo' is a Catalan economist of British extraction based in Barcelona. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

He is currently working on a book with the provisional working title "Population, the Ultimate Non-renewable Resource".

Apart from his participation in A Fistful of Euros, Edward also writes regularly for the demography blog Demography Matters. He also contributes to the Indian Economy blog . His personal weblog is Bonobo Land . Edward's website can be found at EdwardHugh.net.